Imagine if you could buy a home – or something smaller like a fridge – for only what the vendor was asking. Whether the price is $1,000 or $300,000, that is what you pay – you’re not left continuing to pay more, in interest, to a bank.

Loan finance costs you more

If you buy your home or fridge and finance the purchase with a loan from a bank or finance company, you end up paying more – often much, much more – than the purchase price. For example (and while it depends on your circumstances and the terms you agree with your bank), if you buy a house on a traditional mortgage, sometimes you will pay as much or more in interest payments to the bank as you paid for the house itself.

Paying interest is a waste of money if there's an interest-free alternative

Most of us know that when we buy on credit, or take out a mortgage or finance company loan, we end up paying more, but we feel we have no choice because we need (or want!) the item now though we do not have enough cash to pay for it. If, however, there were a way we could access additional cash on an interest-free basis, then choosing to pay interest would be a waste of money.

Interest-free cash – how?

For centuries, people have recognised the benefit of pooling their resources, through co-operatives, buyers’ clubs, investment syndicates and the like. “Savings Pools”, where individuals combine their savings into a larger pool of funds, can bring with them similar benefits. Members deposit funds into the Savings Pool, and then take turns to access the Pool’s funds (say, to buy that fridge!) on an interest-free basis.

Are there Savings Pools in New Zealand?

Yes, there are Savings Pools in New Zealand (and in other countries – for example, the JAK Members Bank which launched in Sweden in 1965). Living Economies Board members – most of whom are themselves members of Savings Pools – know of around 30 such Pools. Living Economies’ role is to educate and inform communities and individuals – whether or not they are members of Savings Pools – on how Savings Pools could work.

Are Savings Pools legal?

Savings Pools are legal – provided the Pool members take care to ensure they abide by applicable legislation. Living Economies can provide information about the legislation that can apply, but its advice is necessarily general, and those involved with Savings Pools as members or prospective members, and persons considering forming a Pool, should seek their own legal advice.

Are there any risks?

Yes, there are risks. The principal risk is that a member does not pay back in full the amount borrowed. If that happens, you could lose some or all of your money. If the Pool has taken security, this will help reduce its loss, but there could still be a shortfall. Another risk is that a signatory could misappropriate funds held in the Pool’s bank account – that is, steal from the Pool. Usually, a Pool will require that payments from its account need two signatories, or will have other security measures in place with its bank, to reduce this risk. And, of course, your savings do not earn interest (that being the trade-off for the ability to borrow from the Pool on an interest-free basis).

How do I:

Join a Savings Pool?

Living Economies may be able to provide contact information for Savings Pools in your area, but it does not recommend or endorse any particular Savings Pool, and it is for each Savings Pool to decide whether to invite new people to join.

Start a Savings Pool?

Talk to your friends, family and colleagues about the concept. Contact Living Economies for additional information about Savings Pools and how they might operate. Living Economies can provide information, but it will not set up a Savings Pool for you, nor help you to manage it once formed. Members of existing Pools may be available and willing to assist with the setting up of, and mentoring for, new Pools.

Living Economies is a charitable trust. One of its objects is to educate New Zealanders about systems of exchange that foster community wellbeing. It does not provide financial advice or legal advice. The material on this site is provided for educational and informational purposes only, and is necessarily of a general nature. Readers should seek their own advice in relation to the formation of or membership of a Savings Pool.